October 02, 2012

Third Circuit Sustains Antitrust Verdict for Exclusive Dealing, Remands for Review of New Damages Model

The Third Circuit handles a lot of antitrust cases. It usually gets them right. It did that again last Friday, in ZF Meritor, LLC v. Eaton Corp., No. 11-3301 (3d Cir. Sept. 28, 2012).

The case involved heavy-duty truck transmissions, the kinds that go in semi-trailer rigs and dump and cement trucks. The biggest maker of the devices, Eaton Corporation, bristled when a competitor, Meritor and later ZF Meritor, motored its way onto Eaton's turf. The bristling manifested itself mainly in new long-term contracts with the four firms that bought the transmissions and put them into the trucks that they in turn sold to end-users and others.

A jury found that the contracts amounted to an unlawful restraint of trade under sections 1, 2, and 3 of the Sherman Act. The panel, by a 2-1 vote, upheld the resulting judgment, deeming the contracts close enough to "exclusive dealing" arrangements that courts have classified as actionable under Sherman Act rule of reason analysis. But the court reversed the district court's decision not to allow ZF Meritor to update its damages expert's model to replace the one the court excluded as unreliable.

The dissenting judge disagreed on the ground that the contracts between Eaton and the direct purchasers seemed to him more like a lawful way to compete on price than a restraint on doing business with ZF Meritor.